News Corp agrees $349m deal for consumer arm of Houghton Mifflin Harcourt

Purchase of unit is Murdoch company’s second publishing buy in less than a week

Rupert Murdoch's News Corp has agreed to buy the consumer arm of educational publisher Houghton Mifflin Harcourt for $349 million (€296 million) in what is the media company's second publishing acquisition in less than a week.

The all-cash purchase of the Houghton Mifflin unit gives News Corp access to high-profile novels from authors including George Orwell and JRR Tolkien.

The deal follows the New York media giant’s announcement last Thursday that it had agreed to buy Investor’s Business Daily for $275 million.

News Corp touted the addition of Houghton Mifflin’s extensive backlist of titles to the company’s HarperCollins publishing unit in a statement Monday.

“Backlists have proven to be a sustainable and growing source of revenues, high margins and cash flow for publishers, particularly evergreen properties with broad, enduring and global appeal,” News Corp said.

Houghton Mifflin Harcourt Books and Media, as the consumer division is known, had net sales of $191.7 million and adjusted earnings before interest, taxes, depreciation and amortization of $26.6 million in 2020, News Corp said.

For its part, Houghton Mifflin said the unit sale would allow the remaining company to “focus singularly on K-12 education and accelerate growth momentum in digital sales, annual recurring revenue and free cash flow while paying down a significant portion of its debt”.

Share price rise

Houghton Mifflin’s shares soared as much as 22 per cent to $7.28 in New York trading Monday. They had risen about 80 per cent this year through March 26th, giving the Boston-based company a stock-market value of about $762 million.

The long-established Houghton Mifflin became Houghton Mifflin Harcourt in 2007 after Riverdeep, the electronic publishing business founded by Irish financier Barry O'Callaghan, completed a $5 billion reverse takeover of Houghton Mifflin and then purchased Harcourt Education and other units from publisher Reed Elsevier.

A recapitalisation of the business in 2010 saw the equity stakes of several Irish investors, including Mr O’Callaghan’s, were written down to zero, and the company subsequently went public in 2013.

– Bloomberg